We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like CNB Financial Corporation (NASDAQ:CCNE).
CNB Financial Corporation (NASDAQ:CCNE) shareholders have witnessed an increase in hedge fund sentiment lately. Our calculations also showed that CCNE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Roger Ibbotson of Zebra Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a look at the recent hedge fund action regarding CNB Financial Corporation (NASDAQ:CCNE).
How have hedgies been trading CNB Financial Corporation (NASDAQ:CCNE)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CCNE over the last 17 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in CNB Financial Corporation (NASDAQ:CCNE) was held by Royce & Associates, which reported holding $20.6 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $9.3 million position. The only other hedge fund that is bullish on the company was Zebra Capital Management.
As aggregate interest increased, some big names have been driving this bullishness. Zebra Capital Management, managed by Roger Ibbotson, initiated the largest position in CNB Financial Corporation (NASDAQ:CCNE). Zebra Capital Management had $0.2 million invested in the company at the end of the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CNB Financial Corporation (NASDAQ:CCNE) but similarly valued. We will take a look at The Cato Corporation (NYSE:CATO), Newtek Business Services Corp. (NASDAQ:NEWT), Oportun Financial Corporation (NASDAQ:OPRT), and Gulfport Energy Corporation (NASDAQ:GPOR). All of these stocks’ market caps are similar to CCNE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CATO | 14 | 36788 | -4 |
| NEWT | 6 | 12659 | 1 |
| OPRT | 12 | 18874 | 12 |
| GPOR | 14 | 72978 | -3 |
| Average | 11.5 | 35325 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $30 million in CCNE’s case. The Cato Corporation (NYSE:CATO) is the most popular stock in this table. On the other hand Newtek Business Services Corp. (NASDAQ:NEWT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks CNB Financial Corporation (NASDAQ:CCNE) is even less popular than NEWT. Hedge funds clearly dropped the ball on CCNE as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on CCNE as the stock returned 10.9% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
